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Digitized  by  the  Internet  Archive 

in  2012  with  funding  from 

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http://www.archive.org/details/banksbanking117100hotc 


ALEXANDER       HAMILTON 


BANKS  AND  BANKING 


1 171— 1888 


An  Historical  Sketch 


BASED    UPON    OFFICIAL    RECORDS 


TOGETHER  WITH  A  FEW   "EPISODES       CONNECTED    WITH   THE    SUBJECT   WHICH 

HAVE   COME   UNDER   THE   OBSERVATION   OF   THE  WRITER   DURING  AN 

EXPERIENCE    OF    TWENTY-FIVE    YEARS    AS    A    BANKER    AND 

MERCHANT   IN   THE   CITY    OF   NEW    YORK 


BY 


PHILO    PRATT    HOTCHKISS 


NEW  YORK  &  LONDON 

XLhc  Ifmlcfcerbocfcer  ipress 

1888 


•>    O    9 


COPYRIGHT    BY 

PHTLO  PRATT   HOTCHKISS 

1888 


Press  of 

G.  P.  Putnam's  Sons 

New  York 


lit     «    • 


TO 

WILLIAM   A.    CAMP,    Esq. 

MANAGER    OF    THE    CLEARING    HOUSE 

OF    THE    CITY    OF    NEW    YORK 

THIS    WORK    IS    DEDICATED, 

WITH 

THE    AUTHOR'S    GREAT    RESPECT    FOR    HIS    MARKED    ABILITY    AS    A 

BANK    OFFICER 


339011 


PREFACE 


This  work  requires  but  few  words  in  the  way  of 
introduction. 

Though  the  author's  purpose  in  writing  the  several 
articles  on  Banks  and  Banking  for  the  Bay  Shore 
Journal,  was  not  to  write  for  publication  outside  of 
the  precincts  of  his  summer  home,  yet  at  the  special 
instance  of  banking  friends  here  and  in  New  England, 
who  desired  a  copy  of  the  writer's  lecture,  delivered 
before  the  Bay  Shore  Literary  Society,  in  Suffolk 
Hall,  March  14,  1888,  which  embraced  the  articles 
heretofore  published  in  the  newspaper,  seemed  to 
impose  it  upon  him  as  a  duty  to  his  friends,  to  pub- 
lish the  sketch  on  "  Banks  and  Banking." 

It  is  by  no  means  claimed  that  this  is  wholly  an 
original  paper. 

Reference,  by  permission,  has  been  had  to  the  valu- 
able work  of  that  accomplished  scholar  and  authority 
on  banking,  Hon.  Willis  S.  Paine,  Superintendent  of 
the  Banking  Department  of  the  State  of  New  York. 

5 


6  PRE  FA  CE. 

Also  to  Lawson's  "  History  of  Banking,"  and  Domett's 
"Bank  of  New  York." 

I  acknowledge  very  important  information  obtained 
by  a  most  careful  research  of  all  of  the  books  on  bank- 
ing contained  in  the  L.  I.  Historical  Society,  through 
the  courtesy  of  the  Society's  faithful  and  learned 
librarian,  Mr.  Geo.  Hannah;  and  last,  but  not  least, 
of  kindly  suggestions  from  my  comrade,  Col.  Geo.  P. 
Bissell,  member  of  the  Veteran  Association  Hartford 
City  Guard,  and  banker  of  Hartford,  Conn. 


CONTENTS. 


PAGE 

Correspondence       ........  9 

Introduction   .........  10 

The  First  Chartered  Bank,  Bank  of  Genoa,  1171  13 

First  Bank  in  the  United  States,  1781     ...  14 

Bank  of  New  York,  1791       ......  14 

Chemical  Bank,  1834       .......  15 

First  United  States  Bank  Incorporated,   1791         .  15 

Second  United  States  Bank  Incorporated,   1816     .  16 

The  Manhattan  Company     .         .         .         .         .         .  17 

Conspiracy  Trials,  1826  and  1827        ....  20 

Renewal  of  Bank  Charters         .....  22 

Increase  of  Banking  Capital 23 

National  Currency        .......  23 

New  York  Clearing  House 25 

American  Exchange  National  Bank  ....  26 

Episodes     ..........  26 

A  True  Story          ........  28 

The  Bank  of  England  .......  31 

The  London  Clearing  House 34 

Call  Loans 37 

Usury 37 

Expulsion  of  the  Jews  from  England  39 

Restoration  of  the  Jews      ......  40 

7 


CONTENTS. 


Barter       ..... 
Cash  Reserves  of  Banks 
Retrospective  . 

Alexander  Hamilton 
Letter  of  Alexander  Hamilton 
Conclusion       . 


PACK 
42 

44 

45 
46 

48 
49 


CORRESPONDENCE. 


Bay  Shore  Literary  Society, 

Bay  Shore,  L.  I.,  March  2,  1888. 

Mr.  Philo  P.  Hotchkiss  : 

Dear  Sir — At  the  next  meeting  of  the  Literary 
Association,  March  14th,  I  should  be  much  pleased 
if  you  would  favor  us  with  your  lecture  on  Banks  and 
Banking,  a  subject  of  interest  to  us  just  now. 

Our  exercises  commence  at  8  p.m.,  and  are  held  in 
Suffolk  Hall. 

Hoping  to  have  the  pleasure  of  meeting  you  on 
that  evening, 

I  am,  very  truly, 

W.  T.  CUSHING, 

President. 


New  York,  March  5,  1888. 

W.  T.  Cushing,  Esq.,  President  Bay  Shore  Literary 
Society  : 

Dear  Sir  —  I  am  favored  by  your  valued  invita- 
tion to  give  my  lecture  on  "  Banks  and  Banking," 
before  the  Bay  Shore  Literary  Society,  Wednesday, 

9 


IO  CORRESPONDENCE. 

March    14th,  at   Suffolk   Hall,  at   8   p.m.,  as  per  your 
letter  2d  inst. 

I  will  be  on  hand  promptly  at  the  appointed  time. 

The  aforesaid  lecture  has  been  prepared  with  con- 
siderable care,  and  not  without  extended  research 
and  examination  of  all  the  published  authorities  on 
Banking,  from  the  chapters  of  Holy  Writ  down  to 
a  late  edition  of  "  Paine  on  Banking." 

The  lecture  occupies  just  fifty-five  minutes  of  time, 
— not  so  long  as  to  weary  any  of  my  neighbors,  I 
hope. 

I  inherit  a  natural  fondness  for  music,  and  if  not 
too  much  trouble,  it  would  be  a  source  of  gratifica- 
tion to  have  one  or  two  good  pieces,  either  vocal  or 
instrumental,  precede  the  lecture.  You  have  abun- 
dant native  talent  for  this  purpose  to  select  from. 
Very  respectfully  your  obedient  servant, 

PHILO  P.  HOTCHKISS. 


Mr.  President,  Members  of  the  Bay  Shore  Literary 
Society,  Friends  and  Neighbors  : 

One  of  Great  Britain's  most  eminent  judges,  when 
asked  what  was  his  ideal  of  supreme  happiness, 
replied  : 

"  To  sit  all  day  on  the  bench,  and  play  whist  till 
twelve  o'clock  at  night,  every  day  and  night  of  my 
life." 

My  personal  ideal  of  a  tolerably  happy  life,  if  the 


CORRESPONDENCE.  1 1 

cares  of  the  world  would  allow  any  such  comfortable 
state  of  existence,  is  to  be  permitted  to  live  and  die 
in  this  pleasant  village,  and  see  it  develop  into  a 
beautiful  city  by  the  sea,  and  to  be  called  upon  by 
your  Society  to  talk  to  you  once  or  twice  a  year  on 
my  favorite  theme. 


BANKS  AND  BANKING. 


"  The  two  greatest  inventions  of  the  human  mind  are  writing 
and  money.  The  common  language  and  self-interest." — Marquis 
De  Mirabeau. 

The  first  chartered  bank  on  this  planet  was  estab- 
lished at  Venice  in  the  year  a.d.  j  i  7 1^  Six  years 
thereafter  the  Bank  of  Genoa  came  into  existence  at 
Genoa,  Italy,  about  the  year  a.d.  11 77  under  the 
title  of  "  The  Chamber  of  St.  George,"  sometimes 
designated  as  "  St.  George "  and  "  Bank  of  St. 
George." 

Unquestionably  there  had  been  capital  invested  in 
money-lending  by  the  ancient  Jews  for  more  than 
one  thousand  years  before  this  bank  began  busi- 
ness. 

Money  was  invested  upon  collateral  security. 
Usury  was  charged,  and  almost  any  obtainable  rate 
was  deemed  lawful  and  right  in  the  earlier  days  of 
the  Christian  era.  Indeed  the  Scripture  recites  the 
reproval  of  the  man  of  "  one  talent  "  for  not  putting 

13 


14  BANKS  AND   BANKING. 

his  Lord's  money  out  at  usury  to  the  money-chan- 
gers, while  in  respect  to  the  men  of  five  and  ten 
talents,  no  objection  was  made  to  the  high  rate  of 
usury  obtained  in  the  matter  of  their  investment. 

The  incorporation  in  the  year  1781  of  the  Bank  of 
North  America,  at  Philadelphia,  the  first  duly  or- 
ganized bank  in  the  United  States,  was  chiefly  due 
to  the  efforts  of  Robert  Morris,  a  representative  of 
Pennsylvania  in  the  Continental  Congress,  and  after- 
wards Treasurer  of  the  United  States. 

The  second  bank  in  the  United  States,  chartered 
by  a  State  government  was  the  Massachusetts  Bank 
at  Boston  in  the  year  1784. 

The  Bank  of  New  York,  with  a  capital  of  $500,- 
000,  was  chartered  by  act  of  the  Legislature  of  the 
State  of  New  York,  March  21,  1791,  though  this  in- 
stitution had  carried  on  a  banking  business  since 
February  26,  1774. 

This  institution  has  never  passed  a  dividend,  ex- 
cept in  1837,  when  it  was  obliged  to  do  so  by  law. 
Previous  to  its  incorporation,  there  is  reason  to  be- 
lieve it  paid  dividends  48  per  cent.  Since  its  incor- 
poration, it  has  paid  862^-  per  cent.,  making  a  total 
payment  to  its  stockholders,  during  100  years  of  ex- 
istence, of  910J-  per  cent.  These  banks  are  still  in 
existence,  never  having  failed,  with  respective  capitals 
and  surplus  on  January  1,  1888,  as  follows  : 


BANKS  AND   BANKING.  I  5 

Bank  of  North  America  .....         $2,500,000 
Massachusetts  National  Bank  .         .         .  1,000,000 

Bank  of  N.  Y.,  Nat.  Banking  Association       .  3,500,000 

The  market  value  of  the  shares,  par  $100,  being 
respectively  : 

Bank  of  North  America  ......         $250 

Massachusetts  National  Bank .         .         .         .         .  120 

Bank  of  N.  Y.,  Nat.  Banking  Association         .         .  210 

The  most  remarkable  record  of  success  in  banking 
is  probably  illustrated  by  that  of  the  Chemical  Na- 
tional Bank  of  the  City  of  New  York,  which  organ- 
ized April  1  st,  in  the  year  1824,  with  a  capital  of 
$300,000. 

They  show  at  the  present  time  a  surplus  of  $5,289,- 
785.  To-day,  $3,500  is  bid  for  one  share  par  $100  of 
their  stock.      Dividends  bi-monthly. 

UNITED    STATES    BANK. 

The  first  bank  of  the  United  States  was  incorpo- 
rated February  25,  1 79 1  ;  the  capital  stock  was  fixed 
at  $10,000,000,  $2,000,000  of  which  was  subscribed 
by  the  government,  to  be  refunded  in  ten  annual  in- 
stalments ;  twenty-five  United  States  citizens  consti- 
tuted the  Board  of  Directors,  who  served  without  pay. 

The  notes  of  the  bank  were  receivable  for  all  debts 
due  to  the  United  States.  They  immediately  went 
into   operation.     The    government    disposed    of    its 


1 6  BANKS  AND  BANKING. 

$2,000,000  of  stock  within  the  specified  time,  realiz- 
ing a  profit  of  57  per  cent,  on  the  original  investment. 

The  second  bank  of  the  United  States  was  incor- 
porated April  10,  1 8 1 6,  and  began  business  January 
7,  1817.  The  capital  was  not  to  exceed  $25,000,000, 
and  the  charter  required  the  directors  to  be  resident 
citizens  and  to  serve  without  pay.  The  bank  was  a 
public  depository,  and  allowed  to  establish  branches 
and  issue  circulating  notes,  receivable  in  payment  of 
debts  due  the  United  States  ;  and,  in  consideration 
of  the  sum  of  $1,500,000,  to  be  paid  to  the  United 
States,  it  was  agreed  that  no  other  bank,  outside  of 
the  District  of  Columbia,  should  be  established  during 
the  ensuing  twenty  years,  the  period  of  its  charter. 

During  the  first  three  years  of  its  existence,  it  en- 
countered numerous  obstacles,  which  almost  resulted 
in  failure,  but,  after  1820,  it  gradually  recovered,  and 
surmounted  all  opposition  until  July  16,  1832,  when 
President  Jackson  vetoed  the  bill  granting  a  re-charter. 

During  the  year  1833,  the  government  deposits 
were  removed  from  the  Bank  of  the  United  States  to 
various  State  banks,  by  order  of  the  Secretary  of  the 
Treasury.  The  bank  continued  its  existence  by  ob- 
taining a  charter  from  the  State  of  Pennsylvania, 
February   18,    1836. 

The  disastrous  history  of  the  bank  under  this  char- 
ter, from  1837  until  its  last  failure  in   1843,  is  shown 


BANKS  AND  BANKING.  \J 

by  the  enormous  decline  in  the  value  of  its  stock, 
from  137,  in  1837  to  i-J  in  1843. 

On  finally  closing  the  affairs  of  the  first  bank  of  the 
United  States,  the  stockholders  received  a  premium 
on  the  par  value  of  their  stock  of  8-^-  per  cent. 

The  second  bank  of  the  United  States  paid  nothing 
to  its  stockholders,  the  entire  capital  of  $28,000,000 
having  been  sunk,  although  its  charter  contained 
substantially  the  same  prohibitions  and  restrictions. 
The  other  creditors,  however,  were  paid  in  full. 

While  nothing  of  a  political  character  at  first 
entered  into  the  establishment  of  banks,  that  feeling 
soon  manifested  itself,  and,  under  the  circumstances, 
very  naturally  so. 

In  1799  John  Adams  was  President,  and  another 
presidential  election  was  imminent.  The  Bank  of 
New  York  was  in  Federal  hands,  and  the  Republi- 
cans naturally  wanted  a  bank  of  their  own  to  control  ; 
but  the  Legislature  was  in  the  hands  of  the  Federals, 
who  were  jealous  of  moneyed  institutions,  and  the 
prospect  of  a  Republican  bank  seemed  dubious  at 
least. 

THE     MANHATTAN    CO. 

It  was  then  Aaron  Burr's  fertile  brain  came  to  the 
rescue.  New  York  had  been  visited  by  the  yellow 
fever,  and  it  was  believed  that  this  malady  was  in- 
duced by  the  lack  of  wholesome  water  in  that  city. 


1 8  BANKS  AND  BANKING. 

Here  was  the  opportunity.  It  was  proposed  to 
incorporate  the  "  Manhattan  Company,"  for  the  be- 
nevolent purpose  of  supplying  New  York  with  pure 
water  ;  $2,000,000  would  do  this,  and  as  these  water- 
works might  not  absorb  the  entire  amount,  the 
petitioners  asked  for  a  provision  authorizing  this 
institution  to  employ  its  surplus  capital  "  in  the 
0yS  purchase  of  public  or  other  stock,  or  in  any  other 
moneyed  transactions  or  operations,  not  inconsistent 
with  the  constitution  and  laws  of  this  State,  or  of  the 
United  States."  And  as  the  object  was  to  supply  a 
want  that  would  always  exist,  it  was  not  unreasonable 
that  the  grant  should  be  given  without  limit  as  to 
time  forever. 

This  corporation,  with  its  unassuming  title,  was 
too  late  seen  to  be  a  banking  institution  with  a  char- 
ter of  the  most  liberal  character.  After  the  charter 
had  passed,  the  Federals  discovered  their  political 
mistake.  The  bill  was  introduced  at  the  very  close 
of  the  session,  hastily  pushed  through  the  Assembly 
and  Senate.  In  the  latter  body  it  was  reported  com- 
plete by  a  select  committee,  and  never  referred  to 
the  committee  of  the  whole.  The  Council  of  Revi- 
sion then  existed,  "  to  revise  all  bills  about  to  be 
passed  into  laws  by  the  Legislature."  The  attention 
of  this  body  was  called  by  the  Chief-Justice,  to  whom 
the  bill  was  referred,   to  the  clause  under  which  the 


BANKS  AND  BANKING.  1 9 

banking  powers  existed.  He  objected  to  this  clause, 
because  he  was  apprehensive  that  the  capital  would 
be  employed  in  trade,  etc.  The  minutes  of  the 
Council  indicate  that  there  was  not  the  slightest 
thought  that  the  bill  created  banking  powers. 

The  Manhattan  Company  has  acted  in  the  capacity 
of  general  transfer  agent  of  the  State  of  New  York 
for  all  the  stock  issued  for  canal  purposes  from  the 
year  1818  to  the  present  time.  From  that  year  to 
the  year  1839,  tne  certificates  of  State  stock  were 
signed  by  the  cashier  of  the  Manhattan  Company 
alone  ;  since  1839  these  certificates  have  been  signed 
by  the  Comptroller  of  the  State,  and  countersigned 
by  the  cashier  of  the  bank  during  a  period  of  sixty- 
six  years  with  perfect  faithfulness  and  to  the  complete 
satisfaction  of  the  State  government.  The  Manhat- 
tan Company  has  issued,  transferred,  and  paid  the 
public  stocks,  and  the  State  has  held,  from  the  year 
1 8 10,  one  thousand  shares,  the  nominal  or  par  value 
of  $50  a  share,  of  the  stock  of  this  bank  for  the 
account  of  the  common-school  fund. 

Many  persons  are  living  in  the  metropolis  who  can 
remember  the  large  water-wheel  which  was  located 
on  Reade,  between  Centre  and  Elm  streets.  This 
corporation,  as  a  water  company,  was  a  most  benefi- 
cent institution.  It  has  been  a  very  conservatively 
managed  bank. 


20  BANKS  AND  BANKING. 

CONSPIRACY  TRIALS  OF    I  826  AND    I  82  7. 

During  the  summer  and  fall  of  1826,  and  early  in 
1827,  several  citizens  of  high  character  in  the  city  of 
New  York  were  indicted  and  tried  for  an  alleged 
conspiracy  to  defraud  the  Morris  Canal  and  Bank 
Company,  the  Fulton  Bank,  the  Tradesmen's  Bank, 
the  Mercantile  Insurance  Company,  the  Merchants' 
Fire  Insurance  Company,  and  other  moneyed  insti- 
tutions. 

Several  of  the  officers  and  directors  or  managing 
agents  of  the  "  Life  and  Fire  Insurance  Company," 
the  "  Sun  Fire  Insurance  Company,"  the  "  United 
States  Lombard  Association,"  and  the  "  Madison  Fire 
Insurance  Company  "  were  implicated  in  these  crimi- 
nal prosecutions,  which  were  widely  and  generally 
known  and  designated  at  the  time  as  the  "  Conspiracy 
Trials." 

Briefly,  the  Life  and  Fire  Insurance  Company  were 
charged  with  using  the  express  powers  given  it  for 
insurance  purposes  to  carry  on  a  banking  business. 
It  caused  its  bonds  to  be  engraved  like  bank  notes, 
and  so  issued  were  placed  like  so  much  paper  currency 
in  circulation.  The  conspiracy  trials  were  still  in  pro- 
gress, the  excitement  produced  by  them  still  continued, 
when  the  Legislature  met  in  January,  1827,  and  Gov- 
ernor Clinton,  in  his  annual  message,  stated  that  the 
then  existing  commercial  revulsions  would  inculcate 


BANKS  AND  BANKING.  21 

the  necessity  of  avoiding  a  recurrence  of  such  calami- 
ties, by  avoiding  the  causes  which  produced  them  ;  that 
the  calamitous  derangements  in  England  had  been 
ascribed  to  a  transition  state  from  war  to  peace,  and 
to  excess  of  production,  but  the  better  opinion  then 
was,  that  they  were  chiefly  imputable  to  excessive 
issues  of  paper  money,  in  the  shape  of  bank  notes ; 
and  as  similar  disasters  were  experienced  almost  con- 
temporaneously in  this  country,  that  they  might  be 
traced  to  similar  causes ;  that  a  bank  might  issue 
notes  to  three  times  the  amount  of  its  capital  paid 
in  ;  that  this  was  intended  as  a  wholesome  restric- 
tion, but  was  in  fact  a  most  pernicious  authorization, 
and  could  never  be  justified  by  any  condition  of 
affairs ;  that  the  authority  to  create  money  would 
invariably  be  abused ;  that  the  power  of  making 
money  was  a  dangerous  faculty,  and  its  liability  to 
perversion  was  in  proportion  to  its  extension  ;  that 
banking  privileges  deposited  in  unskilful  hands  might 
be  abused  without  design,  but  when  granted  to  fraudu- 
lent men  who  preferred  wealth  to  character,  there 
would  be  no  bounds  to  the  evils  that  would  follow. 

The  Governor  further  declared  that  experience  had 
proved  that  applications  for  banking  privileges  were 
made  for  personal  benefit,  and  not  for  public  accom- 
modation. 

In  conclusion,  he  recommended  great  caution  in 


22  BANKS  AND  BANK  IXC. 

making  such  grants  in  future,  and  stated  that  "some 
general  restrictions  were  indispensably  necessary  for 
limiting  the  issue  of  bank  paper  ;  for  regaining  the 
possession  of  a  certain  quantity  of  metallic  money, 
and  adequate  security  for  the  redemption  of  bank 
notes  ;  for  compelling  the  attendance,  and  increasing 
the  responsibility,  of  directors ;  for  detecting  the  con- 
dition of  banking  institutions,  and  for  prohibiting  the 
circulation  of  bank  notes  below  a  certain  sum." 

RENEWAL    OF    BANK    CHARTERS. 

In  the  State  of  New  York,  on  the  ist  day  of  Jan- 
uary, 1829,  there  were  forty  banks,  the  majority  of 
whose  charters  were  about  to  expire,  having  a  com- 
bined capital  of  $15,000,000  actually  paid  in,  and 
loans  and  discounts  aggregating  more  than  $30,000,- 
000,  with  liabilities  of  about  the  same  amount. 

The  question  of  renewing  charters  greatly  agitated 
the  State,  and  involved  problems  of  the  greatest  im- 
portance. Fortunately,  during  the  crisis,  the  elec- 
tion of  Martin  Van  Buren  as  governor  proved  oppor- 
tune. He  reviewed  the  situation  impartially,  and  in 
his  message  to  the  Legislature  in  1829  said:  "To 
dispense  with  the  banks  altogether  is  an  idea  which 
seems  to  have  no  advocate,  and  to  make  ourselves 
wholly  dependent  upon  those  established  by  Federal 
authority  deserves  none." 


BANKS  AND  BANKING.  2$ 

In  considering  the  renewal  of  the  charters  of  sol- 
vent institutions,  he  concluded  with  the  following 
words :  "  The  pecuniary  convulsion  that  must  result 
from  a  compulsory  closing  of  these  extensive  con- 
cerns would  neither  be  slight  in  its  degree  nor  tran- 
sient in  its  duration." 

INCREASE    OF    BANKING    CAPITAL. 

The  rapidity  with  which  banks  multiplied  from 
1848  to  1853,  is  shown  by  the  remarkable  increase  of 
banking  capital,  as  compared  with  previous  years. 
From  1843  to  1848,  the  increase  was  $375,512,  while 
from  1848  to  1853,  the  increase  exceeded  $32,000,000. 

The  stability  of  our  banks  during  those  years,  is 
also  apparent  from  the  fact,  that  during  the  financial 
embarrassment  of  1854,  the  banks  in  this  State,  with 
only  a  single  exception,  satisfied  the  demands  of  their 
bill  holders  without  resort  to  securities  with  the  Bank- 
ing Department. 

NATIONAL    CURRENCY. 

Passing  over  the  great  panic  of  1857,  and  its  effects 
upon  the  country,  we  may  note  that  the  banking 
laws  received  no  material  amendment,  the  State  of 
New  York  presenting  the  best  banking  system  and 
the  best  currency  of  any  State. 

In  1 86 1  came  the  war  of  the  rebellion,  and  with  it 


24  BANKS  AND  BANKING. 

the  demand  of  the  government  for  millions,  when 
thousands  heretofore  had  answered. 

Bank  suspension  and  panic  became  inevitable, 
and  with  the  application  by  Congress  of  the  New 
York  system,  to  its  own  currency,  and  with  its  taxa- 
tion of  ten  per  cent,  on  the  circulation  of  the  State 
banks,  the  latter  at  once  disappeared,  and  United 
States,  "legal  tenders,"  so-called,  and  National  Bank 
currency  took  its  place. 

In  1882  a  compilation  and  revision  of  the  banking 
statutes  became  a  law.  Whatever  is  excellent  in  the 
present  National  Bank  system  belongs  not  to  one 
Secretary  of  the  Treasury  or  another,  but  to  the 
fact  that  the  general  government  borrowed  the  prin- 
ciples of  sound  finance  from  the  great  State  of  New 
York. 

This  system,  too,  has  been  applied  to  the  Bank  of 
England,  so  that  New  York  may  claim  to  be  the 
Empire  State  of  sound  banking,  whose  men  and 
whose  principles  have  given  currency,  whose  actual 
value  is  the  same  as  its  nominal  value,  to  two  worlds. 

Few  people  not  conversant  with  banks  or  banking 
comprehend  the  beneficent  effect  of  having  sound 
banks  to  deposit  money  in,  or  of  the  incalculable 
value  of  the  banks  of  New  York  to  the  merchant  and 
trader,  and  to  the  general  government  itself. 

What    other    power    could    have    carried  out   the 


BANKS  AND  BANKING.  2$ 

admirable  financial  policy  of  Salmon  P.  Chase,  and 
supplied  funds  promptly  and  in  any  required  amount, 
but  the  associated  banks  of  the  city  of  New  York, 
under  our  wonderful  Clearing  House  system  ?  It  is 
impossible  to  break  any  associated  New  York  bank 
that  can  make  a  solvent  showing  to  that  able  and 
accomplished  manager,  William  A.  Camp,  Esq.,  inas- 
much as  Clearing  House  certificates,  countable  as 
reserve,  can  be  issued  almost  any  moment  by  the 
Association,  to  any  solvent  bank.  These  certificates 
are  a  binding  obligation  upon  all  of  the  banks  mem- 
bers of  the  association,  jointly  and  severally,  and  the 
highest  class  of  security. 

NEW    YORK    CLEARING    HOUSE. 

The  New  York  Clearing  House  was  established 
October,  1853,  and  has  become  a  most  important 
institution,  settling  transactions  hardly,  if  at  all,  in- 
ferior in  amount  to  those  of  the  London  Clearing 
House. 

The  work  is  carried  on  in  a  fine  large  banking 
room,  where  there  is  proper  accommodation  for  the 
manager  and  his  clerks,  instead  of  the  small  glass 
box  in  which  the  inspectors  sit  in  the  Lombard 
Street  room  at  London. 

Each  New  York  bank  has  one  settling  clerk  in  the 
exchange  room,  besides  a  messenger  who  brings  and 


26  BANKS  AND   BANKING. 

delivers  the  parcels  of  checks  and  bills.  The  settling 
clerks  sit  in  a  series  of  desks,  arranged  in  an  oval 
form  in  the  middle  of  the  spacious  room,  and  the 
exchanges  are  effected  by  an  equal  number  of  mes- 
sengers simultaneously  walking  around  the  desks, 
delivering  the  parcels  of  credit  and  debit  exchanges. 

The  Association  numbers  sixty-three  banks,  whose 
united  capital  and  surplus  at  present  is  one  hundred 
and  seven  millions.  Specie  eighty-three  millions, 
legal  tenders  thirty-four  millions,  and  deposits  of 
three  hundred  and  eighty-six  millions.  The  aggre- 
gate deposits  to-day  of  five  New  York  banks  are 
over  one  hundred  millions. 

Probably  one  of  the  safest  and  most  conservatively 
managed  banks  in  America,  is  the  American  Exchange 
National  Bank  of  the  City  of  New  York,  with  a  capi- 
tal and  surplus  of  $6,700,000,  deposits  $17,352,838, 
market  value  of  stock  140%. 

EPISODES. 

Some  banking  episodes  have  naturally  come  under 
our  observation  in  an  experience  of  twenty-five  years 
as  a  banker  and  merchant  in  the  city  of  New  York. 

Eternal  vigilance  is  the  price  of  liberty  in  this  as 
in  any  other  profession.  The  sharper  is  always  on 
the  alert  to  beat  the  bank  in  many  ways. 

One  favorite  way  is  to  operate  on  the  institution 


BANKS  AND  BANKING.  2 J 

after  making  the  acquaintance  of  the  paying  teller, 
and  getting  possession  of  a  well-known  local  check 
for  several  thousand,  and  demanding  and  receiving 
small  bills  therefor,  and  then  return  the  somewhat 
cumbersome  package  to  the  polite  teller,  who  receives 
the  same  without  counting  the  bills,  and  he,  the 
sharper,  demands  large  bills  therefor  ;  Mr.  Sharper 
holding  back  a  thousand  dollars  from  the  larger  pile 
of  bills,  leaving  the  bank  short  $1,000,  discoverable 
only  at  balance  time,  3  p.m. 

"  Truth  crushed  to  earth  shall  rise  again  ; 
The  eternal  years  of  God  are  hers." 

Bryant. 

In  this  business  a  lie  travels  somewhat  faster  than 
the  truth. 

A  president  of  a  New  York  bank  once  told  me  that 
in  his  opinion  the  American  people  loved  to  be  hum- 
bugged. 

Look  at  the  case  of  the  Dexter  Savings  Bank  of 
Maine,  where,  on  Washington's  Birthday,  a.d.  1878, 
the  faithful  old  treasurer,  Mr.  John  Wilson  Barron, 
was  brutally  murdered,  and  his  body  placed  inside 
the  bank  vault  ;  and  the  theory  of  death  by  his  own 
hand  and  short  accounts,  at  once  adopted  by  the  wise- 
looking  bank  officials  ;  and  but  for  the  liberality  of  a 
New  York  newspaper  proprietor,  two  murderers  would 
have   escaped  justice,  and   the   martyred   treasurers 


28  BANKS  AND  BANKING. 

memory  would  still   have  born   the  unjust  stigma  of 
default  and  suicide. 

"A    TRUE    STORY." 

Not  many  years  ago,  as  I  was  attending  to  the 
business  of  negotiating  a  line  of  paper  with  a  Con- 
necticut bank  president,  a  lady  called,  whom  we  will 
designate  as  "  Lady  Victoria  "  ;  and  upon  the  retire- 
ment of  my  customer,  asked  for  a  moment's  conversa- 
tion. I  told  her  to  proceed.  She  said  she  had  just 
settled  her  husband's  estate,  and  had  a  sum  of  money 
which  she  wished  to  leave  with  me  for  investment.  I 
told  her  that  I  only  dealt  in  notes  and  safe  investment 
securities,  and  never  speculated,  either  for  myself  or 
customers. 

She  deposited  then  and  there  $40,000,  saying  she 
would  call  in  a  day  or  two  and  decide  how  she  would 
invest  the  money. 

In  a  couple  of  days  she  came  in  and  said  that  she 
had  decided  to  speculate  in  stocks  ;  that  she  had  a 
friend  who  had  given  her  "  sure  points,"  and  ordered 
me  to  buy  a  thousand  shares  of  the  Royal  Bengal 
Mining  Co.  I  was  astonished  at  her  recklessness, 
and  told  her  she  was  all  wrong  ;  that  the  stock  was 
down  to  25,  and  was  almost  certain  to  go  lower  ;  but 
she  said  she  knew  what  she  was  doing,  and  she  had  a 
good  "  sure  point."     I  bought  the  stock,  arid  down  it 


BANKS  AND  BANKING.  29 

went,  and  when  it  had  fallen  seven  points  she  be 
came  alarmed,  and  ordered  me  to  sell  at  a  loss  of 
$7,000. 

After  a  few  days  she  called  again  and  ordered  me 
to  buy  a  thousand  of  Oshkosh  &  Kalamazoo  R.  R. 
Again  I  protested  at  her  want  of  judgment,  when  she 
became  angry,  and  said  that  I  was  her  broker,  and 
bound  to  do  as  ordered.  So  I  bought  the  stock,  and 
this  time  the  stock  declined  ten  points,  making  her 
loss  $10,000.  She  then  ordered  me  to  sell  short  a 
large  block  of  a  stock  she  was  sure  was  going  down. 

I  'was  astonished  at  her  audacity.  This  time  I  de- 
clined to  do  the  business,  and  told  her  that  I  would 
not  be  the  medium  of  her  losing  any  more  money, 
and  that  she  must  find  some  other  banker,  if  she  de- 
sired to  do  business  in  that  wild  manner. 

She  thereupon  requested  me  to  transfer  her  account 
to  another  house,  which  she  named.  Again  I  pro- 
tested, and  told  her  that  the  firm  was  a  very  weak  one, 
and  not  responsible — in  short,  dangerous, — but  she 
was  a  wilful  widow  (some  of  them  are),  and  ordered 
me  to  move  the  account  as  she  said,  which  I  did. 

In  about  two  months  Lady  Victoria  called  again, 
with  a  sad  face,  and  told  me  the  firm  had  failed,  and 
she  had  lost  all  but  $1,000.  I  could  not  laugh, 
although  inclined  to,  as  I  asked  her  what  she  was 
going  to  do. 


3<D  BANKS  AND   BANKING. 

She  deposited  the  money  with  me,  and  said  she 
guessed  it  would  come  out  all  right  in  the  end. 

A  few  weeks  later  Lady  Victoria  called  again, 
smiling  and  happy,  dressed  in  a  lavender  silk  dress. 
She  said  she  had  tried  the  matrimonial  venture  again, 
and  this  time  had  a  sure  thing,  and  asked  me  to  step 
to  the  window  and  see  her  new  husband.  I  looked, 
and  there  in  a  carriage  was  an  old  man,  seventy  years 
of  age,  whom  I  well  knew,  and  whom  I  knew  to  be 
very  much  embarrassed  in  money  matters. 

Said  I,  "  Do  you  think  you  have  money  there  ? 
"Yes,"  said  she.  "Well,"  said  I,  "whoever  told  you 
that,  gave  you  the  same  kind  of  '  sure  points  '  as  you 
got  on  your  stocks.  He  has  considerable  so-called 
property,  and  money  passes  through  his  hands,  but, 
my  dear  Lady  Victoria,  he  is  a  bankrupt." 

Our  lady  turned  pale,  and  meditatingly  said, 
"Thank  you,  for  that  'sure  point.'" 

In  a  few  weeks  the  new  husband  began  to  let  his 
notes  go  to  protest,  and  after  a  few  months  of  illness 
died. 

A  short  time  after  his  death  Lady  Victoria  called 
again,  all  smiles.  "Well,"  said  she,  "there  is  $15,000 
which,  thanks  to  you,  I  saved  from  the  wreck.  "  Now," 
said  she,  "  I  want  that  safely  invested  in  good  promis- 
sory notes,  paying  6  per  cent,  interest,  and  only  in 
those  names  well  known  to  you,  and  rated  by  Dun's 


BANKS  AHD  BANKING.  3  I 

Agency  as  A  x  A-i.  I  have  learned  two  things  : 
first,  that  in  stocks  the  more  '  sure  points '  you  get, 
the  nearer  you  are  to  the  poorhouse ;  and  second, 
that  when  I  marry  again  for  money,  I  '11  actually 
get  it  in  possession  before  the  man  gets  me." 

THE    BANK    OF    ENGLAND. 

The  Bank  of  England  was  established  by  an  act  of 
Parliament  and  Royal  Charter  July  27,  1694,  the 
original  capital  subscribed  being  1,200,000  pounds 
sterling,  in  consideration  of  loaning  the  government 
the  same  amount,  for  which  the  bank  received  a 
yearly  interest  of  8  per  cent.  Its  common  seal  is  and 
must  be  affixed  to  every  bank  note  that  is  issued,  and 
consists  of  the  not  very  handsome  representation  of 
Britannia.  A  not  infrequent  manner  of  remitting  a 
sum  of  money  from  England  to  America  is  to  cut 
the  bank  note  in  halves,  remitting  one  half  by  one 
steamer,  the  other  half  by  another. 

The  governor  and  company  of  the  bank  are 
constituted  by  act  of  Parliament,  bankers  to  the 
state,  and  book-keepers  in  respect  to  the  national 
debt. 

The  title  to  every  particle  of  stock  is  given  on  the 
responsibility  of  the  bank,  and  although  the  stock 
may  have  been  transferred  under  a  forged  power  of 
attorney,  no   question    can   ever  arise    affecting  the 


32  BANKS  AND  BANKING. 

right  or  title  of  the  holder,  when  once  the  stock  has 
passed  into  his  name. 

The  dividends  paid  each  quarter  amount  to  more 
than  five  million  pounds  sterling.  Of  this  sum,  four 
million  pounds  sterling  is  transferred  to  the  accounts 
of  different  corporations  and  banks  by  a  mere  stroke 
of  the  pen. 

The  beneficial  effects  of  this  arrangement  can 
hardly  be  over-estimated.  The  regular  payment  of 
interests  on  public  debts  provides  not  only  a  useful 
employment  for  every  man's  money,  but  each  indi- 
vidual has  also  an  advantage  in  the  support  given  to 
that  state  of  which  he  is  a  member. 

The  Bank  of  England  is  a  bank  of  deposit,  loan, 
and  discount,  but  unlike  other  joint-stock  banks,  it 
does  not  issue  any  circular  notes,  or  grant  letters  of 
credit  to  foreign  countries.  It  does  not  allow  inter- 
est on  deposits,  be  the  amount  ever  so  large.  In 
discounting  bills  the  rate  differs  according  to  the  na- 
ture of  the  securities  offered,  but  the  bank  never 
charges  less  than  the  minimum  rate  publicly  an- 
nounced. 

The  Bank  of  England  always  receives  value  in  one 
shape  or  another  for  every  note  they  issue.  The 
notes  are,  therefore,  payable  to  bearer  on  demand. 
Payment  of  them  by  the  bank  on  presentation  is  im- 
perative.    Occasions  arise  when  the  bank  absolutely 


BANKS  AND  BANKING.  33 

stops  payment  of  its  notes,  but  this  is  not  done  with- 
out the  bank  being  guaranteed  against  the  conse- 
quences thereof,  so  that  if  a  note  on  which  a  stop  has 
been  placed  is  presented  by  a  bona-fide  holder  and  is 
refused,  and  an  action  against  the  bank  for  the  re- 
covery of  the  amount  of  the  note  is  the  result,  the 
bank  of  course  is  indemnified. 

The  consequences  likely  to  result  from  the  absolute 
stopping  the  payment  of  Bank  of  England  notes,  are 
of  too  serious  a  character  to  be  disregarded,  espe- 
cially in  respect  of  notes  transmitted  from  abroad, 
for  bank  notes  pass  freely  on  the  Continent  among 
bankers  and  exchange  brokers.  On  one  occasion  the 
bank  stopped  two  of  their  notes  for  five  hundred 
pounds  sterling  each,  which  had  been  exchanged  by 
two  Paris  bankers  in  the  ordinary  course  of  their 
business,  and  transmitted  to  their  London  agents. 
On  the  refusal  of  payment,  two  actions  at  law  were 
brought  against  the  bank,  resulting  in  the  recovery 
for  plaintiff.  When  the.  result  of  these  actions  be- 
came known  in  Paris,  all  the  bankers  affixed  notices 
in  their  offices  to  the  effect  that  no  Bank  of  England 
notes  would  be  exchanged  by  their  respective  banks, 
thus  throwing  discredit  on  Bank  of  England  notes. 
The  bank  never  reissues  their  notes  ;  when  once  ten- 
dered for  payment  they  are  destroyed.  The  process 
of  destroying  the  notes  is  by  burning  them,  but  this 


34  BANKS  AND   BANKING. 

operation  does  not  take  place  till  they  have  been  laid 
aside  for  a  number  of  years.  The  whole  are  not 
destroyed  together,  but  at  different  times,  and  as 
many  are  burnt  as  correspond  with  the  new  notes 
issued. 

THE    LONDON    CLEARING    HOUSE. 

The  London  Clearing  House  is  a  most  important 
institution.  There  are  three  daily  clearings.  The 
morning  clearing  opens  on  ordinary  days  at  10:30, 
drafts  received  not  later  than  1 1,  and  the  work  must 
be  closed  at  noon.  The  country  clearing  then  begins, 
drafts  being  received  until  12:30,  and  the  clearing 
closed  at  2:15.  The  heaviest  clearing,  however,  is 
that  of  the  afternoon,  which  begins  at  2:30.  The 
bustle  and  turmoil  of  the  work  grows  to  a  climax  at 
4  o'clock,  the  runners  rushing  in  with  the  last  parcel 
of  drafts  up  to  the  moment  when  the  door  is  finally 
closed.  On  the  fourth  day  of  each  month,  when  the 
heaviest  work  occurs,  the  hours  are  extended,  the 
house  opening  at  9  o'clock. 

The  Clearing  House  is  a  plain  oblong  room  with 
rows  of  desks  in  compartments  around  three  sides 
and  down  the  middle.  A  small  office  for  the  two 
superintendents  stands  at  one  end.  Each  bank  sends 
as  many  clerks  to  the  house  as  may  be  requisite  for 
the  rapid  completion  of  the  work,  and  some  banks 
have  as  many  as  six  clerks. 


BANKS  AND  BANKING.  35 

The  checks  and  bills  to  be  presented  by  any  one 
clearing  bank,  say  the  Alliance  Bank,  upon  any  other 
clearing  bank,  are  entered  at  home  in  the  "  Out-clear- 
ing Book,"  and  are  then  sorted  into  twenty-five  par- 
cels, one  of  which  is  to  be  presented  to  each  of  the 
other  clearing  banks.  On  reaching  the  Clearing 
House  these  parcels  are  distributed  around  the  room 
to  the  desks  of  the  clerks  representing  the  several 
paying  banks,  who  immediately  begin  to  enter  them 
in  the  "  In-clearing  Book,"  in  columns  bearing  at  the 
head  the  name  of  the  presenting  bank.  After  being 
entered  the  drafts  are  as  soon  as  possible  forwarded 
to  the  banking  house  for  examination  and  entry  in 
the  bank  books.  Any  checks  or  bills  refused  payment 
are  called  "  returns,"  and  can  generally  be  sent  back 
to  the  Clearing  House  the  same  day,  entered  again 
as  a  reverse  claim  by  the  bank  dishonoring  them  on 
the  banks  which  presented  them.  At  the  close  of  the 
day  the  clerks  of  the  Alliance  Bank  are  able  to  add 
up  the  whole  of  the  claims  which  have  been  made 
upon  them  by  the  other  twenty-four  banks,  and  they 
learn  from  the  out-clearing  book  the  amount  of  the 
claims  which  the  Alliance  Bank  is  making  on  other 
banks.  The  difference  is  the  balance  which  the  Alli- 
ance Bank  has  either  to  pay  or  receive,  as  the  case 
may  be.  The  balances  are  communicated  to  the 
Superintendent  of  the  Clearing  House,  and  inserted 


2,6  HANKS  AND   BANKING. 

in  a  kind  of  balance  sheet.  When  finally  added  up, 
the  debit  and  credit  sides  of  the  sheets  should  ex- 
actly balance,  because  every  penny  to  be  received  by 
one  bank  must  be  paid  by  another. 

In  former  years,  the  balance  due  by  or  to  each  bank 
was  paid  in  bank  notes,  and  in  the  year  1839  average 
daily  transactions  to  the  amount  of  about  three  mill- 
ions were  cleared  by  the  use  of  200,000  pounds  ster- 
ling in  bank  notes  and  20  pounds  sterling  in  coin,  or 
about  one  fifteenth  part  of  the  debts  liquidated. 
More  recently  the  balances  are  paid  by  drafts  upon 
the  Bank  of  England,  in  which  bank  each  city  bank 
deposits  a  large  part  of  their  spare  cash. 

One  ingenious  minor  arrangement  in  the  London 
Clearing  House  is  the  division  of  the  whole  list  of 
banks  into  three  groups,  in  such  a  way  that  one  of 
the  clearing  clerks  of  the  Alliance  Bank  corresponds 
with  one  group  of  the  other  banks,  a  second  clerk 
with  the  second,  and  so  on.  Thus  when  a  compari- 
son or  correction  of  accounts  is  made  between  any 
two  banks,  it  is  known  precisely  which  clerk  must 
answer  to  the  question  called  across  the  room. 

Although  some  banks  employ  as  many  as  six 
clerks,  the  pressure  is  very  great  at  times.  The 
facility  which  these  clerks  acquire  by  practice  in 
making  and  adding  up  entries  is  very  great  ;  but  the 
intense   head  work    performed   against  time,    in    an 


BANKS  AND  BANKING.  37 

atmosphere  far  from  pure,  and  in  the  midst  of  bustle 
and  noise  arising  from  the  corrections  shouted  from 
one  clerk  to  another  across  the  room,  must  be  ex- 
ceedingly trying.  Brain  disease  is  occasionally  the 
consequence. 

CALL    LOANS. 

It  has  of  late  years  been  the  practice  of  banks 
having  a  redundancy  of  money  to  employ  large  sums 
at  call,  that  is,  lending  it  to  note-  and  stock-brokers 
with  the  option  of  having  it  back  at  any  moment,  the 
latter  employing  it  in  discounts  and  loans.  But  the 
lending  money  to  note-brokers  upon  the  security  of 
notes  deposited  with  the  bank  is  not  discounting,  for 
discounting  and  lending  money  on  notes  are  two 
distinct  operations. 

Banks  are  bound  to  obey  the  orders  of  their  cus- 
tomers within  the  usual  course  of  business  ;  if  they 
disobey  them  they  are  responsible  both  for  the  delay 
and  any  consequences  which  directly  follow  the  delay. 

USURY. 

As  to  what  is  "  usury.  "  It  is  difficult  to  arrive 
at  what  is  understood  to  be  "  usury,"  the  views  of 
borrowers  and  lenders  being  so  wide  apart.  One,  a 
person  of  large  means,  is  satisfied  with  three  and  a 
half  per  cent,   per  annum  ;    another  wants  six  per 


89011 


38  BANKS  AND   BANKING. 

cent.  ;  another,  with  only  a  few  thousand  to  invest, 
wants  twelve  per  cent.  ;  and  still  another  is  not  satis- 
fied with  any  thing  less  than  two  per  cent,  per  month. 

Webster  defines  usury  as  a  premium  paid  or  stipu- 
lated to  be  paid  for  the  use  of  money  ;  interest. 

The  Hebrew  word  for  usury  means  "  biting." 

The  law  of  God  certainly  prohibits  the  vigorous 
imposing  of  conditions  of  gain  for  the  loan  of  money, 
and  exacting  interest — usury,  without  respect  to  the 
condition  of  the  borrower,  whether  he  gain  or  lose, 
whether  poverty  occasioned  his  borrowing,  or  a  visi- 
ble prospect  of  gain  by  employing  the  borrowed 
money  entered  into  the  contract. 

It  is  said  in  Exodus  xxii.,  25  :  "  If  thou  lend 
money  to  any  of  my  people  that  is  poor,  thou  shalt 
not  be  to  him  as  an  '  usurer.'  " 

And  in  Leviticus  xxv.,  35,  36,  t>7  '  "  If  thy  brother 
be  waxen  poor,  then  thou  shalt  relieve  him,  yea, 
though  he  be  a  stranger,  or  a  sojourner,  that  he  may 
live  with  thee.     Take  thou  no  usury  of  him." 

But  in  Deuteronomy  xxiii.,  20,  the  law  of  God 
seems  to  tolerate  usury  towards  strangers  :  "  Unto  a 
stranger  thou  mayest  lend  upon  usury." 

The  law  of  usury,  therefore,  seems  to  have  been 
peculiar  to  the  ancient  Jewish  state,  but  in  equity  it 
obligeth  us  to  show  mercy  to  those  we  have  advan- 
tage of,  and  to  be  content  to  share  with  those  we 


BANKS  AND  BANKING.  39 

lend  to,  in  loss  as  well  as  profit,  if  Providence  cross 
them. 

And  in  view  of  this  fact  an  eminent  theological 
writer  says  :  "  It  seems  as  lawful  for  me  to  receive 
interest  for  money  which  another  takes  pains  with, 
improves,  but  runs  the  hazard  of  in  trade,  as  it  is  to 
receive  rent  for  my  land,  which  another  takes  pains 
with,  improves,  but  runs  the  hazard  of  in  husbandry." 
(Alex.  Cruden,  M.  A.  :  "  Concordance  of  the  Holy 
Scriptures,"  533.) 

We  therefore  see  that  the  practice  of  requiring 
in  repayment  of  money  lent,  any  thing  more  than 
the  money  lent,  was  formerly  thought  to  be  a  great 
moral  wrong.  But  for  many  years  that  opinion  has 
ceased  to  exist,  and  has  lost  much  of  its  practical 
legal  force.  It  is  no  longer  deemed  more  wrong  to 
take  pay  for  the  use  of  money,  than  for  the  use  of  a 
horse,  or  a  house,  or  any  other  property,  and  that 
money  should  be  bought  and  sold  upon  whatever 
terms  the  parties  themselves  should  agree  to. 

EXPULSION    OF    THE    JEWS    FROM    ENGLAND. 

The  ancient  Jews  were  expelled  from  England  in 
the  year  1290  for  usurious  and  extortionate  practices. 
October  10th  was  the  day  fixed  by  royal  edict,  but 
the  king  benignantly  allowed  them  till  "All  Saints 
Day,"  after  which  all  who  delayed  were  to  be  hanged 


40  BANKS  AND  BANNING. 

without  mercy.  Even  the  zeal  of  the  Bishop  of 
London  (Robert  de  Gravesend)  outran  that  of  the 
archbishop  and  the  king  in  his  persecution  of  these 
thrifty  people.  He  ordered  all  of  their  synagogues 
to  be  destroyed.  The  archbishop,  prevailed  on  by 
the  urgent  applications  of  the  Jews,  graciously  in- 
formed the  bishop  that  he  might  conscientiously  al- 
low one  synagogue,  "if  that  synagogue  did  not  wound 
the  eyes  of  the  pious  Christians  by  its  magnificence," 
to  remain. 

RESTORATION    OF    THE    JEWS. 

After  having  been  banished  from  England  370 
years  for  practising  usury,  they  were  kindly  permitted 
to  return  by  Cromwell,  in  the  year  1650,  when  a  cele- 
brated physician,  Manasseh  ben  Israel,  presented  a 
petition  to  the  Protector  for  the  readmission  of  his 
countrymen  into  the  realm. 

The  address  was  drawn  with  eloquence  and  skill. 
It  commenced  by  recognizing  the  hand  of  God  in  the 
appointment  of  Cromwell  to  the  Protectorate.  It 
dexterously  insinuated  the  instability  of  all  govern- 
ments unfavorable  to  the  Jews,  and  it  asserted  the 
general  joy  with  which  the  ambassadors  of  the  repub- 
lic had  been  received  in  the  synagogues  in  Holland 
and  elsewhere. 

Manasseh  ben  Israel  issued  a  second  address  to  the 


BANKS  AND  BANKING.  4 1 

commonwealth  of  England.  He  complimented  the 
general  humanity  of  the  nation,  stated  his  sole  object 
to  be  the  establishment  of  a  synagogue  in  the  king- 
dom. He  adroitly  endeavored  to  interest  the  reli- 
gious enthusiasm  of  England  on  his  side  by  declaring 
his  conviction  that  the  restoration  of  Israel,  and  of 
course  the  last  day,  was  at  hand. 

He  did  not  neglect  the  temporal  advantages  of  the 
worldly,  the  profits  to  be  derived  from  their  traffic, 
and  concluded  by  expressing  his  sincere  attachment 
to  a  commonwealth  abounding  in  so  many  men  of 
piety  and  learning. 

Whether  moved  by  one  or  all  of  these  reasons, 
Cromwell  summoned  an  assembly  of  two  lawyers, 
seven  citizens  of  London,  and  fourteen  divines,  to 
debate  the  question  :  first,  whether  it  was  lawful  to 
admit  the  Jews?  second,  if  lawful,  on  what  terms  it 
was  expedient  to  admit  them  ? 

The  lawyers  decided  at  once  in  the  affirmative. 
The  citizens  were  divided,  but  the  contest  among  the 
divines  was  so  long  and  so  inconclusive  that  Oliver, 
having  so  spoken  that  one  present  asserted,  ''I  have 
never  heard  a  man  speak  so  well,"  at  length  grew 
weary,  and  the  question  was  adjourned  to  a  more 
convenient  season. 

It  is  a  curious  fact  of  the  times,  that  so  far  were 
some  of  the   republican  writers  from  hostility  to  the 


42  BANKS  AND   BANKING. 

Jews,  that  Harrington  in  his  "  Oceana"  gravely  pro- 
poses disburdening  the  kingdom  of  the  weight  of 
Irish  affairs,  by  selling  the  Emerald  Isle  to  the  Jews. 

The  necessities  of  Charles  II.  and  his  courtiers 
quietly  accomplished  that  change  on  which  Cromwell 
had  not  dared  openly  to  venture. 

The  convenient  Jews  came  quietly  into  the  king- 
dom, where  they  have  ever  since  maintained  their 
footing,  and  no  doubt  contributed  their  fair  propor- 
tion to  the  national  wealth  as  industrious,  law-abiding, 
peaceable  citizens. 

BARTER. 

Some  years  since,  Mademoiselle  Zelie,  a  singer  of 
the  Theatre  Lyrique  at  Paris,  made  a  professional 
tour  around  the  world  and  gave  a  concert  in  the 
Society  Islands.  In  exchange  for  an  air  from  Norma 
and  a  few  other  songs,  she  was  to  receive  a  third  part 
of  the  receipts. 

When  counted,  her  share  was  found  to  consist  of 
three  pigs,  twenty-three  turkeys,  forty-four  chickens, 
five  hundred  cocoa-nuts,  besides  considerable  quanti- 
ties of  bananas,  lemons,  and  oranges. 

There  is  something  absurdly  incongruous  in  the 
fact  that  a  joint-stock  company  called  "  The  African 
Barter  Company,  Limited,"  existed  in  London  until 
recently,  which  carried  on   its  transactions  upon  the 


BANKS  AND  BANKING.  43 

West  Coast  of  Africa  entirely  by  bartering  European 
manufactures  for  palm  oil,  gold  dust,  ivory,  coffee, 
gum,  and  other  raw  produce. 

In  the  Book  of  Job  (ii.,  4)  we  read:  "  Skin  for 
skin,  yea  all  that  a  man  hath,  will  he  give  for  his 
life  "  ;  a  statement  clearly  implying  that  skins  were 
taken  as  the  representative  of  value  among  the  an- 
cient Oriental  nations. 

Etymological  research  shows  that  the  same  may 
be  said  of  the  northern  nations  from  the  earliest  times. 
In  the  Esthonian  language  the  word  "raha"  gener- 
ally signifies  money,  but  its  equivalent  in  the  kindred 
Lappish  tongue  has  not  yet  altogether  lost  the 
original  meaning  of  skin  or  fur.  Leather  money  is 
said  to  have  circulated  in  Russia  as  late  as  the  reign 
of  Peter  the  Great,  and  it  is  worthy  of  notice  that 
classical  writers  have  recorded  traditions  to  the  effect 
that  the  earliest  currency  of  Rome,  Laceda^mon 
(las-e-dee-mon),  and  Carthage  was  formed  of  leather. 
We  need  not  go  back,  however,  to  such  early  times 
to  study  the  use  of  rude  currencies. 

In  the  traffic  of  the  Hudson  Bay  Company  with 
North  American  Indians,  furs,  in  spite  of  their  dif- 
ferences of  quality  and  size,  long  formed  the  medium 
of  exchange.  It  is  very  instructive,  and  corrobora- 
tive of  the  previous  evidence,  to  find  that  even  after 
the  use  of  coin  had  become  common  among  Indians, 


44  BANKS  AND   BANKING. 

the  skin  was  still  commonly  used  as  the  money  of 
account. 

Thus  Whymper  says  :  "  A  gun,  nominally  worth 
about  forty  shillings,  brought  twenty  '  skins.'  This 
term  is  the  old  one  employed  by  the  Company.  One 
skin  (beaver)  is  supposed  to  be  worth  two  shillings, 
and  it  represents  two  marten,  and  so  on." 

In  the  Old  Testament,  the  notion  of  money  is 
expressed  three  times  by  the  Hebrew  word  "kesitah," 
which  is  translated  in  certain  old  versions  into  words 
meaning  lamb  (not  a  Wall  St.  lamb). 

This  might  seem  to  be  an  additional  proof  of  the 
former  use  of  cattle  as  a  medium  of  exchange  ;  but  I 
am  informed  that  this  translation  probably  arises 
from  an  accidental  blunder,  and  that  the  original 
meaning  of  the  word  "  kesitah  '  was  that  of  "a  cer- 
tain weight,"  or  "an  exact  quantity."  The  corre- 
sponding word  in  the  Arabic  "  kist "  is  said  to  denote 
a  pair  of  scales. 

CASH    RESERVES    OF    BANKS. 

It  is  important,  but  very  difficult  to  decide,  what 
is  the  amount  of  real  cash  held  by  banks  generally,  in 
readiness  to  meet  their  liabilities. 

Many  banks  publish  balance  sheets  professing  to 
show  the  reserve  of  ready  money,  and  when  we  in- 
quire into  the  nature  of  the  bank's  ready  money  it  is 


BANKS  AND  BANKING.  45 

found  to  consist  in  a  great  degree  of  money  invested 
in  government  securities,  deposited  with  other  banks, 
or  loaned  on  call — that  is,  lent  to  brokers,  members 
of  the  Stock  Exchange,  who  invest  it  in  negotiable 
securities.  From  the  published  balance  sheets  we 
get  no  positive  indications  of  the  real  metallic  re- 
serve of  the  country  available  for  the  payment  of 
foreign  debts. 

Thus  the  whole  fabric  of  our  vast  commerce  is 
found  to  depend  upon  the  improbability  that  the 
merchants  and  other  customers  of  the  banks  will  ever 
want,  simultaneously  and  suddenly,  all  of  the  specie 
and  legal  tenders  which  they  have  a  right  to  receive 
on  demand  at  any  moment  during  banking  hours. 

RETROSPECTIVE. 

"  Lives  of  great  men  all  remind  us, 
We  can  make  our  lives  sublime  " 

Longfellow. 

in  this  as  well  as  any  other  profession.  We  are  like 
unto  the  insects  that  in  the  unseen  depths  of  the  ocean 
lay  the  coral  foundations  of  uprising  islands. 

In  the  end  comes  the  solid  land,  the  olive  and  the 
vine,  the  habitations  of  man,  the  arts  and  industries  of 
life,  the  havens  of  the  sea  and  ships  riding  at  anchor. 

But  the  busy  toilers,  who  had  laid  the  beams  of 
a  continent  in  a  dreary  waste,  are  entombed  in  their 
work,  and  sometimes  forgotten  in  their  tombs. 


46  BANKS  AND   BANKING. 

They  brought  nothing  into  this  world,  and  may 
carry  nothing  out,  and  there  is  nothing  left  of  it  all 
but  a  tolling  bell,  a  handful  of  earth,  and  a  passing 
tradition.  A  man  may  be  libelled  to-day  as  a  fool,  a 
fanatic,  and  a  knave,  and  to-morrow  his  libellers 
sneak  into  his  funeral  procession,  and  the  chief 
magistrate  of  forty  millions  of  freemen  begs  the 
honor  of  two  feet  of  space  at  his  obsequies,  and  yet 
it  is  not  always  thus.  Many  in  our  profession  have 
left  behind  a  just  and  fragrant  memory,  not  a  few  of 
them  leaving  in  their  places  worthy  representatives 
of  their  name  and  blood. 

George  Washington's  name  will  live  forever  in  the 
hearts  of  the  American  people. 

Abraham  Lincoln,  by  that  wonderful  pen,  directed 
by  the  hand  of  Almighty  God,  decreed  that  henceforth 
and  forever  none  but  freemen  should  inhabit  America. 

He  was  a  benefactor,  a  martyr,  a  saint. 

ALEXANDER    HAMILTON. 

But  it  was  reserved  for  Alexander  Hamilton  to  be 
the  promoter  and  firm  friend  of  banks,  first,  last,  and 
all  of  the  time.  To  his  consummate  ability,  influence, 
and  fostering  care  the  earlier  banks  of  the  country 
owed  their  success  and  life. 

He  became  Secretary  of  the  Treasury  when  the 
Constitution  of  the  United  States  went  into  opera- 


BANKS  AND  BANKING.  47 

tion  in  1789,  and  while  he  was  a  director  in  the  Bank 
of  New  York  ;  but  he  continued  to  show  a  lively  in- 
terest in  its  welfare,  and  he  was  the  firm  friend  and 
adviser  of  its  cashier. 

In  1790  the  bank  was  made  agent  of  the  United 
States. 

In  1792,  the  Society  for  Establishing  Useful  Man- 
ufactures, in  which  Alexander  Hamilton  was  inter- 
ested, and  which  had  recently  been  organized  in  Phil- 
adelphia, applied  to  the  Bank  of  New  York  for  a  loan 
to  enable  it  to  carry  out  its  plans  for  building  facto- 
ries at  Paterson,  N.  J. 

The  busy  city,  which  to-day  has  50,000  inhabitants, 
was  then  a  settlement  with  ten  dwellings. 

At  Hamilton's  suggestion,  the  bank  lent  the  soci- 
ety $10,000  on  pledge  of  United  States  deferred  stock, 
with  interest  at  5  per  cent.,  and  a  few  months  later  a 
further  loan  of  $35,000  was  made  to  the  society  on 
similar  terms. 

Hamilton,  in  his  letter  to  the  bank,  said  :  "  In  my 
opinion,  banks  ought  to  afford  accommodation  in  such 
cases  upon  easy  terms  of  interest.  Institutions  of  this 
kind  ought  to  consider  it  as  a  principal  object  to  pro- 
mote public  purposes." 

The  cashier  indicated  the  feelings  of  the  officers  of 
the  bank  toward  Hamilton  in  his  letter  of  June  25th  : 

"  Our  Directors  are  informed  of  your  sentiments 


48  BANKS  AND  BANKING. 

respecting  the  loan  to  the  Manufacturing  Society. 
Be  assured,  my  dear  sir,  that  they  have  so  much  con- 
fidence in  any  measure  pointed  out  by  you,  and  take 
so  much  pleasure  in  promoting  your  views,  that  by 
complying  with  your  wishes  they  are  glad  to  have 
an  opportunity  of  acknowledging  the  obligations  this 
institution  is  under  to  you." 

LETTER    FROM    ALEXANDER     HAMILTON    TO    THE     DIREC- 
TORS   OF    THE    BANK    OF    NEW     YORK. 

Treasury  Department,  January  25,  1795. 

Gentlemen  : — You  were  so  obliging  as  to  cause 
it  to  be  intimated  that  the  payment  of  the  loan  of 
$200,000  had  of  your  institution  might  be  deferred 
if  the  service  of  the  United  States  should  require  it. 

It  will  be  a  great  convenience  to  this  department 
to  avail  itself  of  the  permission,  so  as  to  defer  the 
reimbursement  of  the  principal  of  that  sum  to  a  year 
from  its  commencement.  The  interest  can  be  paid 
at  such  periods  as  are  agreeable  to  you. 

I  cannot  let  slip   this  opportunity  of  thanking,  for 

the  last  time,  the  Directors  of  the  Bank  of  New7  York 

for  that  decided,  prompt  support  of  my  administra- 

•  tion  which  they  have  upon  every  occasion  given.      It 

has  made  a  lasting  impression  on  my  heart. 

With  great  consideration  and  esteem,  I  have  the 
honor  to  be,  gentlemen,  your  obedient  servant, 

Alexander  Hamilton. 

To  the  Directors  of  the  Bank  of  New  York. 


BANKS  AND   BANKING.  49 

CONCLUSION. 

General  Washington  wrote  to  his  English  friend  in 
the  year  1778,  these  lines  : 

"  If  the  people  of  the  United  States  of  America 
continue  to  be  true  to  themselves,  no  power  on  earth 
can  prevent  their  becoming  a  great,  a  powerful,  and 
a  commercial  country." 

And  said  the  Hon.  Junius  S.  Morgan,  the  eminent 
London- American  banker,  in  the  year  1876,  in  the 
city  of  New  York,  at  a  dinner  given  in  his  honor  by 
Governor  Tilden  and  other  citizens  of  New  York  and 
Connecticut  : 

"  That  prophecy  has  been  wonderfully  fulfilled, 
and  should  American  legislation  henceforth  be  care- 
ful to  promote  the  highest  national  honor  and  integ- 
rity, without  spot  or  blemish,  no  earthly  power  can 
prevent  the  people  of  this  country  from  continuing  a 
free,  a  commercial,  and  a  respected  nation. 

"  The  future  is  with  us.  Providence  has  done 
every  thing  for  us." 

History  records  that  Christopher  Columbus  was 
not  only  a  shareholder  but  a  depositor  in  the  Bank 
of  Genoa,  and  a  firm  believer  in  banks  and  banking, 
as  evidenced  by  his  last  earthly  act. 

Upon  his  deathbed  he  directed,  by  his  last  will 
and  testament,  Don  Diego,  his  eldest  son,  or  who- 


50  BANKS  AND   BANKING. 

ever  should  inherit  his  estate,  to  invest  such  sums  as 
he  may  be  able  to  save  out  of  the  revenue  of  his 
estate,  in  a  stock  in  the  Bank  of  St.  George,  which 
gives  an  interest  of  6  per  cent. ;  and  let  him  therefore 
collect  and  make  a  fund  of  all  his  wealth  in  "  St. 
George  of  Genoa,"  and  let  it  multiply  there  ;  and,  to 
show  that  our  navigator  had  confidence  in  his  ability 
to  invest  money  safely,  as  well  as  a  firm  and  abiding 
faith  in  some  form  of  religion,  he  directs  Don  Diego, 
in  the  last  clause  of  his  will,  that,  every  time  and  as 
often  as  he  confesses,  he  first  show  this  obligation,  or 
a  copy,  to  his  Father  Confessor,  praying  him  to  read 
it  through,  that  he  may  be  enabled  to  inquire  respect- 
ing its  fulfilment.  (Irving's  "  Columbus,"  vol.  III., 
pp.  450-452.) 

And  thus,  in  honoring  Christopher  Columbus  as  a 
friend  and  promoter  of  the  old  Bank  of  Genoa,  let  us 
not  forget  his  great  services  in  discovering  the  grand- 
est continent  in  this  or  any  other  world. 

How  we  should  have  rejoiced  to  have  been  with 
our  friend  on  the  morning  of  the  "  third  day,"  as  the 
sun  came  up  out  of  the  water  for  the  last  time,  and 
birds  of  new  plumage  came  singing  through  the  tat- 
tered sails  of  the  ship  glad  songs  of  welcome  to  the 
land,  and  flowers  of  strange  odor  drifted  by  her  keel, 
and  heard  that  shout :  "  Land  ho  ! "  and  America, 
beloved  America,  was  ours.      Ours  to   inherit,  ours 


BANKS  AND  BANKING.  5  I 

to  foster,  ours  to  transmit.  The  greatest  and  best 
of  all  lands.  The  land  of  the  free,  and  the  home  of 
the  brave.  The  land  where  the  lowliest  of  Almighty 
God's  creatures  can,  by  industry  and  a  virtuous  life, 
attain  to  the  very  front  rank  of  any  profession,  and 
be  loved  and  respected  like  unto  him  whose  last 
words  were :  "  In  manus  tuas,  Domine,  commendo 
spiritum  meum  "  ("  Into  thy  hands,  O  Lord,  I  com- 
mend my  spirit "),  and  who  now  sleeps  in  his  quiet 
tomb  at  Havana,  in  the  island  of  Cuba,  upon  which 
we  to-night  drop  a  fragrant  wild-flower,  gathered  from 
some  favored  spot  "  on  old  Long  Island's  sea-girt 
shore,"  as  we  see  the  certain  star  of  empire,  shining 
not  only  over  our  beautiful  (city)  village,  but  over  all 
the  broad  land  which  Columbus  discovered,  and  hav- 
ing no  farther  west  to  go,  will  shine  and  stay  with  us 
forever. 


HOTCHKISS   &  CO. 


BANKERS 


Dealers  in  Commercial  Paper 


34    PINE   STREET 


New  York 


52 


UNIVERSITY  OF  CALIFORNIA  AT  LOS  ANGELES 

THE   UNIVERSITY   LIBRARY 

This  book  is  DUE  on  the  last  date  stamped  below 


~  & 


<,aK 


*$$&  ' 

■ 

JAN  3      1956' 

APR  i  2 

1960 

Wi  e'Be' 

DlSCHI\W£-URt 


MAR     * 


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Q7S 


jni  *:vm 


f&m 


wtC.otAi.o      m    DEC  04  7985,-f-  RfCDLD-Um 
;^964  lOBggTWK  NOVO  9  1995 

REC'D  LDURf. 

««i     DEC  2  3  74 


°£C231974- 


Form  L-0 
20m-l, '42(8518) 


#02  3  1988 


OCT  1  2  2009 


3   1158  00434  8826 


mm 


9 


